Question 1

The most commonly used method of statistical sampling for tests of details of balances is

Accepted Answer

A)  attributes sampling. 
B)  systematic sampling. 
C)  discovery sampling. 
D)  monetary unit sampling. 
A)  attributes sampling. 
B)  systematic sampling. 
C)  discovery sampling. 
D)  monetary unit sampling.

Question 2

In stratified sampling, a maximum of four stratum can be used.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is an accurate statement regarding how the acceptable risk of overreliance (ARO) and the acceptable risk of incorrect acceptance (ARIA) interact to affect evidence accumulation?

Accepted Answer

A)  If internal controls are likely to be effective, preliminary control risk can be increased. 
B)  A lower control risk requires a lower ARO in testing the controls, which requires a smaller sample size. 
C)  If controls are found to be effective, control risk can remain low, which permits the auditor to increase ARIA, thereby requiring a smaller sample size in the substantive tests of details of balances. 
D)  If misstatements are considered unlikely, ARIA will decrease, and the sample size will also decrease. 
A)  If internal controls are likely to be effective, preliminary control risk can be increased. 
B)  A lower control risk requires a lower ARO in testing the controls, which requires a smaller sample size. 
C)  If controls are found to be effective, control risk can remain low, which permits the auditor to increase ARIA, thereby requiring a smaller sample size in the substantive tests of details of balances. 
D)  If misstatements are considered unlikely, ARIA will decrease, and the sample size will also decrease.

Question 4

An example where an auditor might be found to fail to obtain sufficient and appropriate evidence for a sample of expense items being tested would include the auditor failing to determine whether the sample expenses were recorded in the correct period and in the correct general ledger accounts.

Accepted Answer

A) True 
 B)False

Question 5

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances, and state whether each factor is directly or inversely related to sample size.

Accepted Answer

Factors that influence sample size for n

Question 6

Discuss each of the six possible courses of action the auditor can take when he or she has concluded that the population is misstated by more than a tolerable amount.

Accepted Answer

The six possible courses of action the a

Question 7

Explain why monetary unit sampling, or probability proportional to size sampling, is not useful for detecting understatements.

Accepted Answer

Monetary unit sampling is a technique th

Question 8

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was not materially misstated. It was, in fact, materially misstated. This situation illustrates the risk of

Accepted Answer

A)  incorrect rejection. 
B)  incorrect acceptance. 
C)  assessing control risk too low. 
D)  assessing control risk too high. 
A)  incorrect rejection. 
B)  incorrect acceptance. 
C)  assessing control risk too low. 
D)  assessing control risk too high.

Question 9

The purpose of stratification is to permit auditors to emphasize certain aspects of a population and deemphasize others.

Accepted Answer

A) True 
 B)False

Question 10

As the ratio of expected misstatements in the population to tolerable misstatements increases, the confidence factors which the auditor should apply decreases.

Accepted Answer

A) True 
 B)False

Question 11

What is the purpose of applying stratified sampling to a population?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 12

________ is a method of projecting from the sample to the population to estimate the population misstatement. It assumes that misstatements in the unaudited population are proportional to the misstatements found in the sample.

Accepted Answer

A)  Mean-per-unit estimation 
B)  Point estimate 
C)  Monetary unit 
D)  Basic precision 
A)  Mean-per-unit estimation 
B)  Point estimate 
C)  Monetary unit 
D)  Basic precision

Question 13

Acceptable audit risk and acceptable risk of incorrect acceptance are inversely related; that is, as AAR increases, ARIA decreases.

Accepted Answer

A) True 
 B)False

Question 14

If analytical procedures are performed with no indications of likely misstatements, ARIA will ________ and the sample size will ________.

Accepted Answer

A)  remain the same; increase 
B)  decrease; decrease 
C)  increase; decrease 
D)  decrease; increase 
A)  remain the same; increase 
B)  decrease; decrease 
C)  increase; decrease 
D)  decrease; increase

Question 15

The most important difference among tests of controls, substantive tests of transactions, and tests of details of balances lies in what the auditor wants to measure. Explain what each type of test attempts to measure.

Accepted Answer

Tests of controls focus on testing the o

Question 16

When using monetary unit sampling, evaluating the likelihood of unrecorded items in the population is

Accepted Answer

A)  unnecessary. 
B)  impossible. 
C)  possible but difficult. 
D)  an automatic outcome of the process. 
A)  unnecessary. 
B)  impossible. 
C)  possible but difficult. 
D)  an automatic outcome of the process.

Question 17

When dealing with variables sampling and sampling risk, it is important to understand that

Accepted Answer

A)  for variables sampling, auditors use ARIA but not ARIR. 
B)  ARIR is of serious concern to the auditor because of potential legal implications. 
C)  ARIA is a one-tailed statistical test. 
D)  the confidence coefficients for ARIA are the same as the confidence level. 
A)  for variables sampling, auditors use ARIA but not ARIR. 
B)  ARIR is of serious concern to the auditor because of potential legal implications. 
C)  ARIA is a one-tailed statistical test. 
D)  the confidence coefficients for ARIA are the same as the confidence level.

Question 18

When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?

Accepted Answer

A)  a decrease in the tolerable misstatement 
B)  small expected misstatements 
C)  an increase in the tolerable misstatement 
D)  an increase in the acceptable risk of incorrect acceptance 
A)  a decrease in the tolerable misstatement 
B)  small expected misstatements 
C)  an increase in the tolerable misstatement 
D)  an increase in the acceptable risk of incorrect acceptance

Question 19

Using statistical sampling to assist in verifying the year-end accounts payable balance, an auditor has accumulated the following data:   Projecting the misstatement to the population, the auditor's estimate of year-end accounts payable balance would be

Accepted Answer

A)  $5,050,000. 
B)  $5,125,000. 
C)  $6,000,000. 
D)  $6,150,000. 
A)  $5,050,000. 
B)  $5,125,000. 
C)  $6,000,000. 
D)  $6,150,000.

Question 20

The auditor must consider the possibility that the true population misstatement is greater than the amount of misstatement that is tolerable when the auditor is performing

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Exam 17: Audit Sampling for Tests of Details of Balances

The most commonly used method of statistical sampling for tests of details of balances is

In stratified sampling, a maximum of four stratum can be used.

Which of the following is an accurate statement regarding how the acceptable risk of overreliance (ARO) and the acceptable risk of incorrect acceptance (ARIA) interact to affect evidence accumulation?

An example where an auditor might be found to fail to obtain sufficient and appropriate evidence for a sample of expense items being tested would include the auditor failing to determine whether the sample expenses were recorded in the correct period and in the correct general ledger accounts.

Identify each of the seven factors that influence sample size for nonstatistical tests of details of balances, and state whether each factor is directly or inversely related to sample size.

Discuss each of the six possible courses of action the auditor can take when he or she has concluded that the population is misstated by more than a tolerable amount.

Explain why monetary unit sampling, or probability proportional to size sampling, is not useful for detecting understatements.

While performing a substantive test of details during an audit, the auditor determined that the sample results supported the conclusion that the recorded account balance was not materially misstated. It was, in fact, materially misstated. This situation illustrates the risk of

The purpose of stratification is to permit auditors to emphasize certain aspects of a population and deemphasize others.

As the ratio of expected misstatements in the population to tolerable misstatements increases, the confidence factors which the auditor should apply decreases.

What is the purpose of applying stratified sampling to a population?

________ is a method of projecting from the sample to the population to estimate the population misstatement. It assumes that misstatements in the unaudited population are proportional to the misstatements found in the sample.

Acceptable audit risk and acceptable risk of incorrect acceptance are inversely related; that is, as AAR increases, ARIA decreases.

If analytical procedures are performed with no indications of likely misstatements, ARIA will ________ and the sample size will ________.

The most important difference among tests of controls, substantive tests of transactions, and tests of details of balances lies in what the auditor wants to measure. Explain what each type of test attempts to measure.

When using monetary unit sampling, evaluating the likelihood of unrecorded items in the population is

When dealing with variables sampling and sampling risk, it is important to understand that

When selecting a sample size for substantive tests of balances which factor, other factors being equal, would result in a larger sample?

Using statistical sampling to assist in verifying the year-end accounts payable balance, an auditor has accumulated the following data: Projecting the misstatement to the population, the auditor's estimate of year-end accounts payable balance would be

The auditor must consider the possibility that the true population misstatement is greater than the amount of misstatement that is tolerable when the auditor is performing

The Demand for Audit and Other Assurance Services

The CPA Profession

Audit Reports

Professional Ethics

Legal Liability

Audit Responsibilities and Objectives

Audit Evidence

Audit Planning and Materiality

Assessing the Risk of Material Misstatement

Fraud Auditing

Internal Control and Coso Framework

Assessing Control Risk and Reporting on Internal Controls

Overall Audit Strategy and Audit Program

Audit of the Sales and Collection Cycle: Tests of Controls

Audit Sampling for Tests of Controls and Substantive Tests of Transactions

Completing the Tests in the Sales and Collection Cycle: Accounts Receivable

Audit of the Acquisition and Payment Cycle: Tests of Controls, Substantive Tests of Transactions, and Accounts Payable

Completing the Tests in the Acquisition and Payment Cycle: Verification of Selected Accounts

Audit of the Payroll and Personnel Cycle

Audit of the Inventory and Warehousing Cycle

Audit of the Capital Acquisition and Repayment Cycle

Audit of Cash and Financial Instruments

Completing the Audit

Other Assurance Services

Internal and Governmental Financial Auditing and Operational Auditing

Filters

If analytical procedures are performed with no indications of likely misstatements, ARIA will and the sample size will .